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2018 (12) TMI 1662

..... Ltd. - HELD THAT:- The claim of the Assessee was that Co-operative Bank is essentially a Co-operative Society and therefore deduction has to be allowed under Clause (d) of Sec.80P(2). The Tumukur Merchants Souharda Credit Cooperative 2015 (2) TMI 995 - KARNATAKA HIGH COURT followed the decision of the supreme Court in The Totgars Co-operative Sales Society Ltd. [2010 (2) TMI 3 - Supreme Court] and held that interest earned from Schedule bank or cooperative bank is assessable under the head income from other sources and therefore the provisions of Sec.80P(2)(d)of the Act was not applicable to such interest income. It is thus clear that the source of funds out of which investments were made remained the same in AY 2007-08 to 2011-12 and in AY .....

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..... 61 (Act) to the Assessee on interest income earned on investment in Bagalkot District Central Co-operative Bank and interest earned on savings bank account, FD with Jamkhandi Sugars Ltd. is eligible for deduction u/s.80-P(2)(a)(i)/80P(2)(d) of the Income Tax Act, 1961 (Act). The Assessing Officer denied the claim of the Assessee on the ground that interest income earned by making investment of surplus funds has to be assessed under the head Income from other Sources and not income from business and since interest income is not assessed as business income, the claim for deduction cannot be allowed. In coming to the above conclusion, the AO relied on the decision of the Hon ble Supreme Court in the case of The Togar s Co-operative Sales Socie .....

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..... e decision of the Hon ble Karnataka High Court in the case of Tumukur Merchants Souharda Credit Cooperative Ltd. 230 taxman 309 (Karn), the DR relied on a subsequent decision of the Hon ble Karnataka High Court in the case of PCIT Vs. Totgars Co-operative Sale Society Ltd. 395 ITR 611 (Karn.). We have carefully gone through the said judgment. The facts of the case before the Hon ble Karnataka High Court was that the Hon ble Court was considering a case relating to Assessment Years 2007-2008 to 2011- 2012. In case decided by the Hon ble Supreme Court in the case of the very same Assessee, the Assessment years involved was AY 1991-92 to 1999-2000. The nature of interest income for all the AYs was identical. The bone of contention of the Asses .....

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..... Assessee s own funds or out of liability was not subject matter of the decision of the Hon ble Karnataka High Court in the decision cited by the learned DR. To this extent the decision of the Hon ble Karnataka High Court in the case of Tumukur Merchants Souharda Co-operative Ltd. (supra) still holds good. Hence, on this aspect, the issue should be restored back to the AO for a fresh decision after examining the facts in the light of these judgment of the Hon ble Apex Court rendered in the case of The Totgars Co-operative Sale Society Ltd. (supra) and of Hon ble Karnataka high Court rendered in the case of Tumukur Merchnts Souharda Co-operative Ltd. (supra). 5. The AO will afford opportunity of being heard to the Assessee and filing appropr .....

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